Japan is the second-largest economy in the world today. Its economy is just not growing as fast as those of its G8 counterparts. The country could not rely on domestic consumption to fuel its economic growth, and has to depend on external trade as its economic growth engine. These are some of the economic issues that Japan faces today.

The issue with China is that the country lacks the sound financial and legal institutions to circulate the capital generated back into the local economy. The local companies generating profits and capital have no avenues to reinvest within the country, which means they have to park the money outside the country. On the other hand, the companies seeking capital to finance their investments cannot get it domestically and have to seek foreign capital which come with higher risk premiums (read: higher interest rates).

Even with a well-developed financial infrastructure there must be willing lenders and borrowers on both sides. In Singapore, our own local banks have been moving steadily and cautiously away from investing in the property sector (both local and overseas) which used to be their mainstay business, to other business sectors as well. This is a healthy development for our economy.

The analogy of the shopkeeper providing credit to the customer so that the latter can buy from his shop is not quite correct. The Chinese, the Indians and the rest of the developing countries export their human capital (labour) as well as natural resources (for some) to the US and the rest of the world. That's their primary value-add to the world economy.

What's the lesson here? Surely it cannot be just 'to borrow and spend, not save'. That's not the route to growth and prosperity, but a route to inflation and eventual collapse of the economy. The fall of the Roman Empire is a good example, where inflation was one of the reasons that led to its demise. Let's not be distracted about 'saving' or 'spending', the issue is about efficient allocation of economic resources to sustain growth.

The lesson is to be able to continuously create value to grow and keep our place in the global economy. And we can continue to do this through the efficient use of our human capital (through education and training), our systems and our infrastructure that have been developed over these years.

There is no need to 'pass the buck' down the line.

Fok Kar Kee